In response to the critical need for a cleaner energy technology, invention kicked into high gear. Fuel cells generate energy with little or no harmful emissions. Drastic cost reductions have made them contenders to deliver stationary and portable energy for a multitude of other applications. The advances in fuel cell technology are real. As one leading fuel cell engineer has said, “This is not just smoke and mirrors.” Fuel cells promise to greatly reduce energy-related environmental impacts without significantly compromising our modern lifestyles.
Little wonder, then, that some investors have been betting, and winning big, on publicly traded companies with major stakes in fuel cell technology. From the beginning of 1995 to the end of 1997, the share price of the acknowledged leader in the field, Ballard Power Systems, soared 1100 %. In just this past year Ballard’s shares rose 224%, closing at $63.16 after having been as high as $144.95. The overall performance of a few of the smaller players was also impressive. FuelCell Energy’s share price shot up a remarkable 273% in that same time period, while Plug Power’s stock decreased 52%. However, in most cases if investors bought near the high points for these stocks and held them, by year’s end they had lost half their equity or more. That’s why we speak of “pitfalls” as well as promise.
Until now, this sort of meteoric rise in market capitalization was largely reserved for biotech and Internet stocks. But as Red Herring magazine recently observed, “There is potentially far less economic and political risk associated with fuel-cell stocks. While biotech products have to pass Food and Drug Administration test trials, and many Internet stocks have unproven revenue models, fuel-cell companies could succeed for fundamental business reasons alone.”
Still, most of the fuel cell companies do not yet have a commercial product to offer and have never turned a profit. Some of the most important issues affecting fuel cell commercialization have yet to be answered. In light of such rapid technological breakthroughs, who’s to say that today’s leaders will remain at the head of an expanding fuel cell pack. And given the run-up in share prices, perhaps fuel cell stocks are already overvalued. The buzz and well-meaning halo of virtue surrounding this clean, green technology can be infectious. But investing in fuel cell companies is nothing if not speculative.
This report is presented in the hope that it can help you to cut your way through the hype and jargon. We will explain very briefly how fuel cells work; outline the main types of fuel cells and their relative merits for specific applications; and introduce you to a few of the leading fuel cell companies. We will also outline their development and marketing strategies, discuss their alliances (if any) with larger corporations; and warn of the major uncertainties that face this burgeoning new industry. Finally, we will provide links and recommended reading that should expedite your further digging. All of this will, we trust, help you to make well-informed decisions.
What is a Fuel Cell?
A fuel cell is a clean and quiet device that generates electricity from hydrogen and oxygen. An individual cell delivers very little power, so thin cells are combined like slices of bread in a loaf to form a fuel cell “stack.” Fuel cells simply reverse the familiar high school science demonstration in which electricity is put through water to produce hydrogen and oxygen. In the most common transportation fuel cell, a polymer plastic membrane coated with platinum is sandwiched between two flat electrodes. Hydrogen flows in on one side, oxygen from the air on the other. They combine to form water so pure you can drink it and generate electricity without combustion or nasty emissions.
A fuel cell is a bit like a battery, but better, because it needs no slow recharging. It produces electricity as long as fuel and air are supplied to it.
British lawyer and physicist Sir William Grove discovered the principle of the fuel cell in 1839, decades before the invention of the internal combustion engine. But then it largely languished until the Apollo space program in the 1960s. No batteries could last long enough for a flight to the moon. NASA spent tens of millions of dollars in a successful crash program that used fuel cells to power the on-board electrical systems.
They worked, but the commercial potential of fuel cells seemed minimal. The cells that NASA deployed were hand-built and used exotic materials, so the cost per kilowatt of power was astronomical. They were also bulky. Other types of fuel cells were more promising, though, and research continued at a low funding level at several national laboratories and universities. Beginning in the mid-1980s, government agencies in the US, Canada and Japan significantly increased their funding for fuel cell R & D. Meanwhile, the environmental advantages of fuel cells became a political factor, and their green potential began to capture the public imagination. When advances in the output of fuel cells reached the point where it was clear they could power a car, investment in the technology began to grow exponentially. The rest, as they say, is history.
Excerpts from A Fuel Cell Primer: The Promise and the Pitfalls By Tom Koppel Ph.D. and Jay Reynolds. To order your a copy of the Fuel Cell Primer please visit TomKoppel.com Copyright 2000 by Tom Koppel and Jay Reynolds All Rights Reserved
